Chapter 8. Option Mechanics [PDF] [**]
1. Pricing of V[S(t), t]
Two Approaches to Black-Sholes PDE
2. Black-Scholes Formula
3. Black Formula
Futures Prices and Forward Rates
4. Greeks from Black-Scholes Formula
[Appendix]
Ito's Lemma [PDF]
Calibrating Geometric Brownian Process [PDF] (Ch. 8, 13)
Chapter 9. Option Combos [PDF]
1. Put-Call Parity
2. Risk Reversal
3. Call Overwriting
4. Strangle
5. Straddle
6. Butterfly
7. Binary or Digital Option
8. Range Option
9. Barrier Option
Almost Zero Cost Risk Reversal [PDF]
Chapter 10. Convexities of Financial Products [PDF]
1. Concept of Convexity
2. Examples
Options
Bond
Forward Position
IRS Position
Prepayment Option
Quanto
3. Summary
Forward vs. Futures [PDF]
Chapter 11. Bond Price and Short Rate Processes(Part 1) [PDF][**][Part 2]
1. Bond Pricing in Black-Scholes Framework
Replication(or Self-Financing) Portfolio Approach
2. Techniques for Short-Rate Processes
3. Examples
Vasicek(1977)
Cox-Ingersoll-Ross(CIR, 1985)
Orstein-Uhlenbeck SDE [PDF]
Vasicek Model(1977) [PDF]
Cox-Ingersoll-Ross Model(1985) [PDF]
Calibration of Short Rate Process [PDF] (Ch. 11, 13)